Q&A: Why is Google now focusing on the enterprise?

I had the opportunity Thursday to speak at length with Matt Glotzbach, head of products for Google Enterprise, about Google’s newfound focus on attracting businesses to its Web-based suite of office productivity applications, Google Apps.

The sector has seen exceptional growth over the past year, Glotzbach said. Google recently won over Motorola’s handset division, transferring some 20,000 employees from Microsoft’s on-premise Office and Exchange solutions to Google’s services on the cloud.

And the Mountain View, Calif.-based tech superpower is battling – quite successfully – for the business of the Los Angeles city government, which recently selected Google Apps to replace its old productivity system. Microsoft has poured thousands of dollars in lobbying into convincing the L.A. City Council otherwise, hoping to secure the government’s business for Office.

I also asked Glotzbach about Microsoft’s upcoming Office Web Apps, which the Redmond-based company started rolling out two weeks ago as a limited technical preview. Office Web Apps will offer lightweight versions of Word, Excel, PowerPoint and OneNote to directly compete with Google Apps, which includes Gmail, Google Docs, Google Calendar and Google Sites.

Below is an edited transcript of my interview with Glotzbach.

Glotzbach

What trends do you see in the sector of Web-based productivity solutions, and why are businesses starting to feel comfortable using cloud-computing platforms such as Google Apps?

We formally launched the for-business version of Google Apps back in early 2007, so it’s been about two-and-a-half going on – getting close to three years now. And from the very beginning it was definitely strong in the small and medium business segment, as would probably be expected. You know, as small companies, startups – not just technology companies but individual proprietorships, small mini-shops, that sort of thing – were coming online more and requiring services like e-mail and collaboration for their employees. Going the cloud-based model and Google Apps is sort of the preeminent solution. It just made sense – those companies weren’t going to go buy and install and maintain hardware, and all of that. So we’ve always had, literally from Day 1, we’ve always had a very strong presence in the small- and medium-business segment.

I think what’s happened over the past few years – and this trend continues to accelerate – is more and more medium- and larger-size enterprises are now seeing the same benefits and really starting to adopt. And I think adopting the cloud-computing model, and Google Apps in particular, is becoming more mainstream. I think we’re out of the original, early-adopter phase, where there were one or two large brand names that you and I may have heard of that were doing this. And they were kind of seen as the aggressive front-runners who were really on the bleeding edge.

And now, every week or two, we’re sort of announcing publicly another large enterprise that has migrated, for e-mail services like mail and calendaring and instant messaging, and also for collaboration services like basic office productivity and e-mail collaboration. So we’re really seeing that kind of coming into the mainstream over the course of this year and really becoming something prominent in the larger-business segment.

Could you give a few examples of larger businesses that have decided Google Apps is their best choice, and why?

Probably one of the most recent that was announced not too terribly long ago was Motorola. They took their entire handset division, which is – round numbers, I don’t know the exact off the top of my head – but round numbers on the order of 20,000 or so users, and moving off of the traditional installed Exchange, Outlook setup and moving to Google Apps for their mail and calendaring systems. So doing that enterprisewide. And then also leveraging the office productivity capabilities in our Google Docs and Google Sites suite. …

Another name that you may be familiar with is the Morgans Hotel Group. They run the luxury hotel chain in various parts of the U.S. and the U.K. They moved their whole user base over. And they were a great example where running systems, even commodity systems like e-mail and collaboration technology, was difficult for them given the distributed nature of their organization. By definition, every property for them is an office that has to have a group of users. And those users aren’t traditional users that are sitting at the same desk all day, they’re people who move around a lot, they’re people who are in different places within the facility, they’re people who need mobility access, et cetera. So not only was the cost-saving attractive to them, but also the mobility and the fit for that more, kind of, deskless or nontraditional worker. …

Obviously cost is always top-of-mind, especially in the economy that we’ve all been living through for the last year or so. So I think a lot of the conversations that we have with CIOs and CEOs, they’re brought to the table initially looking at the cost benefits, because Google Apps can be – we charge $50 per user per year for the full suite of technology. So it’s a dramatic cost savings over a traditional Exchange-type setup or a Lotus Notes-type setup. We’ve heard estimates anywhere from – there’s a Forrester report that has a cost comparison where Google is three to four (times) cheaper than the traditional setup. And then we’ve had customers who said their (current) per-user fee, fully loaded, is anywhere from $300 or $400 to – I had a customer tell me literally yesterday that theirs is upwards of $800 per user, their internal-cost numbers for providing this.

So a lot of the conversations start about cost, but candidly they trend very quickly toward the benefits of the cloud-computing model in terms of the rapid pace of innovation and the capabilities that are constantly being rolled into the suite. As well as the accessibility of being able to access the technology from any device, whether it be a PC with a browser or a mobile device, with no additional setup and tools required to make that happen.

One of the main concerns businesses have about switching to the Web-based platform is security and reliability, since data would be stored in Google’s data centers instead of their own servers. What does Google tell potential customers to make them more comfortable switching?

Getty Images

Google’s two data centers in The Dalles, Ore., are seen from the air June 15, 2006, around the time of their opening. The centers each are the size of a football field. Click to enlarge

There definitely is an education curve. And ultimately I’d frame it as there’s a trust relationship. I think that’s nothing new in technology. Ultimately, vendors and customers need to form a trust relationship. I will tell you, it’s something that’s gotten easier even just over the course of 2009, because I think cloud computing in general has become much more mainstream. And as more and more large enterprises are adopting Google Apps, that obviously gives the next customer even more confidence and, “Well, hey I’m not the first, this is well-vetted,” et cetera.

In terms of the process, it is – as I said – it’s ultimately a trust-building relationship where we share a lot of information publicly about what we do through security white papers and things like that. And as we get further down the path with an enterprise customer, we share even more information under nondisclosure and privately, where they can see first-hand, if you will, the security and data-privacy controls that we have in place.

And ultimately, I would say most, if not all, of our customers come out with the realization that our operations are at least as secure, and many time more secure, than their own on-premise versions of those operations. Because information management, information security is our primary job here at Google. That’s all we do. We don’t run retail stores, we don’t sell computers or handsets, we don’t make widgets or produce cars or do scientific research. We do information management and information security. That’s our primary focus.

Why do you think interest in Web-based productivity platforms is growing now?

I think it’s really a confluence of events that, kind of, all the right things came together at the right time, at the same time. One is, just fundamentally, the technology, I think, has reached a maturation point where it is a viable alternative or viable replacement for sort of the traditional desktop or heavyweight app. …

If you can think back to some number of years – not too long ago – in the past, when you talked about moving to a Web-based version of an application, it was usually a – you were giving something up. It was less responsive, it was less feature-rich, you couldn’t do as many things. But you kind of had to give something up so you could get that capability in the browser, so there was a trade-off. Now with applications, it’s actually the other way around. You get more because it’s in the browser.

My best example is with Gmail: the reason I can have a 25-gigabyte inbox for my business, the reason I can do sub-second search across my personal mail for Google, my corporate account. … I have real-time translation of any message in my inbox from any language to any language. Those are things that are just unachievable on the local desktop, on the local PC. So I think that’s one key thing that’s happened over the past few years is the technology has gotten there in terms of being able to offer not only solutions that are on par with their kind of traditional or legacy equivalents, but even better in a lot of cases.

The second is, the connectivity piece has really accelerated or matured over the last few years. Now, if you’re anything like me, when I go someplace I’m frustrated if there’s not wireless capability, if there’s not a good amount of connectivity. I’ve come to expect it. I book my travel now somewhat based on which airlines offer Wi-Fi in flight. And that’s something that’s – it’s really matured a lot over the last few years in terms of higher speed and more availability of high-speed connectivity, which is obviously something that helps the cloud-computing application trend.

And then last, but definitely not least, I think the cost element is – we have been in tough economic times. Businesses have always been looking at ways to drive efficiency. And how do you make – you know, IT is a big cost center. And so I think the economy has forced people to take an even closer look: “What’s core to my business and what’s a commodity that I don’t need to be spending my time and money on?”

And, you know, e-mail and office productivity are great examples where, yeah, they’re absolutely necessary components – most businesses wouldn’t run without them – but they’re a commodity in that no business really needs to run their own. … Things like e-mail, things like office productivity are services that a business shouldn’t be wasting their time and money on managing themselves. They can outsource that to someone like Google at a much lower price with a higher surface level and a higher capability level, and spend their money – and more importantly, their people – on problems that are core to their business, whatever that may be.

Google has offered a complete Google Apps suite for nearly three years, and it has become popular with individual users. Why is Google focusing on attracting enterprise income now?

A couple reasons. One is, it is core to our business and it’s a core part of our business. So obviously it is still a relatively small part of our financial portfolio in terms of our revenue side, but it is a very fast-growing component and obviously someplace that we see a very large opportunity. The second is, we’ve really – in addition to the fact that it is a great opportunity – we’re seeing a lot of traction.

As I said, I think if we were having this conversation a year, year-and-a-half ago, I’d be talking to you about the early adopters like Genentech, who just signed on board, et cetera. And in that short span of the last 12 months or so, we’ve really moved out of, I think, that early-adopter phase and we’re starting to hit that mainstream, where more and more companies – of all sizes, but especially the medium and large variety – are adopting more quickly. So we definitely see that the timing is right and the events have all lined up. We have a great solution, the market is ready to take and consume that solution, and it represents a really material opportunity for Google.

Google is dabbling with traditional advertising – specifically billboards – to reach out to potential enterprise customers. This is out of the ordinary for Google. Why start advertising?

Obviously, we do a lot online – we’re big into the online model, as you might have guessed. And this was a bit of an experiment, frankly. Not everybody sees everything exclusively online, and it is a little bit different in terms of trying something. So we did a first round of experiments in a few cities, and they were positive. … We’re going to continue to iterate on that experiment and you’ll probably be seeing some more, kind of, nontraditional advertising from Google in the next few months.

“Nontraditional”?

Traditional for the usual business, but not traditional for Google. Exactly. Exactly.

How big of a deal for Google is the potential business of the Los Angeles city government? And how does L.A.’s interest in Google Apps show the changing attitude toward Web-based solutions?

For the city of L.A., it’s really more for less. Which is, they get significantly more functionality and capability than they have (now). Today they’re on a fairly old and antiquated internal system. So (with Google Apps) they get a lot more capability and they get it for a lot less. I think the estimated cost savings by the CAO (city administrative officer) report for the city that was published publicly is, you know, $7 (million) or $8 million in savings. And that’s the hard-dollar savings – that’s not even trying to account for productivity savings, et cetera, which is tens of millions if you try to factor that in. So, they get a lot more for a lot less. That’s No. 1.

No. 2, the city of L.A., like the federal government – like a lot of cities – are in tight budget-crunch time. People don’t want to see their taxes go up, et cetera. So, if they can get that cost savings – and again, more importantly, redistribute their workforce to the things that are core to the city; e-mail is an important function that the city needs to use, but it’s not a core competency or core part of running the second largest city in the country. So they see that opportunity.

And on the more-for-less front, they today don’t have a – they have said that the security of their system is substandard to what Google can offer them. The reliability of their system is significantly substandard to what Google’s publicly seen reliability is. The redundancy and disaster recovery – the fact that if there were some sort of, you know, God forbid, a natural disaster or some type of attack, the fact that Google can distribute the data to other data centers completely out of the state of California and the employees would still have access to their data.

And then finally, I think another important point where the city is a great example – the city has some 30,000 or so employees and is a very diverse group of people. You know, anything from legislators and office workers who are sitting in a more traditional office environment; to first-responders, firemen, policemen; to sanitation workers, et cetera. So it’s a very diverse group. And Google Apps is a great solution to reach all of those users in their workplace, where for some of those people checking their e-mail or doing productivity related things might be on their PC at home in the evening, because they don’t have an office. For others that might be on their mobile device while they’re out in the field. And for yet others it might be in their traditional environment, office environment.

So there’s really a lot in there. And (the L.A. proposal is) obviously very high-profile – you know, the bid went out and I think there were 15 or so responses to that RFP (request for proposals). So a lot of different large technology companies who were bidding for that business, and obviously Google won the RFP process and now they’re going through the various committees and hopefully a vote by the City Council.

Microsoft was one of those companies that submitted a proposal to the L.A. city government. And now Microsoft is spending thousands of dollars in lobbying, trying to convince the City Council that an on-premise solution such as Office, plus the connectivity service of Exchange, is better than Google Apps.

But Microsoft also will soon release its own Web-based office productivity applications, Office Web Apps. What does Google think of Office Web Apps and what challenges are ahead of Microsoft in this endeavor?

I’m very excited about the fact that Microsoft is moving – or intends to and has announced the intention to move – to a cloud-based model with Office and with Exchange and having a multi-tenet environment, which is something they don’t have today. I think it’s a perfect validation that that is where customers want to move, that’s what companies are asking for. You know, first and foremost I think their entry, or their announced entry – I’m excited to actually see the technology roll out – but their proposed entry into the space is great, because it acts as a strong validation from obviously a very strong technology company that’s been serving customers for quite some time.

You know, I think the challenges that Microsoft has in front of them are two-fold. One is the business challenge, which is they’ve got a strong (position) in the traditional on-premise space. And their hosted model – as I talked about earlier – challenges the economics of that space. So they have that to contend with in terms of, you know, keeping both sides of the business happy from a shareholder perspective. So, I don’t envy that.

And then probably more fundamentally, the technology is very, very different. Taking technology that was built to run in a relatively small scale – where even if you take some of the largest enterprise deployments of an e-mail system, you may be talking hundreds of thousands of users; very rarely do you even get into that scale, let alone a million users – and try to make that technology support literally tens of millions – or, in our case, hundreds of millions of users – on a single, global, multi-tenet infrastructure: That’s no small task. I think Google has a real advantage in that we don’t have that kind of on-premise legacy from either a business-model perspective, but more importantly from a technology perspective. You know, we were built from the ground up.

So, does Microsoft have a lot of catching up to do?

You know, I think so. Like I said, (Office Web Apps) remains to be seen until it’s really released and out there. I think probably the biggest difference that I see in the two models is, you know, we look at Google (Apps) and we really built Google (Apps) to be a very high-feature, high-function set of productivity applications that run exclusively in the browser. So it’s not a companion product or a client piece of software, et cetera. So they’re really built around, run exclusively in the browser and be collaborative in nature. …

If you look at where office productivity technologies have been focused since their inception, and even until now, most office productivity technology has been about climbing the “vertical axis” – adding more and more features and capabilities so that individuals could create better end-work products, whether that be more intelligent bulleting features or better tables or more styles and to make a flashier presentation. But it’s really been around me as an individual creating a piece of an artifact, a piece of spreadsheet, a document, a presentation.

Where we started focusing from the beginning with Google Docs is really more on that “horizontal axis,” where obviously we’ve had baseline capabilities of what any individual can do in any of the applications – and that continues to get better week over week – but we’ve really focused on, “How do we build technologies for the team to collaborate?” It’s not about – I don’t know about you, but I very rarely am heads-down and get to work on my own anymore. …

And so, our technologies are really built around – yes, if I’m an individual I can go in and build a great-looking, high-quality, printable work product in the form of a document, or give a presentation, or build a numeric spreadsheet and do analysis – but it’s really about, “How can I use those tools to collaborate with our team?”